Updated 18 August 2021
Once you have calculated the fuel scale charge, it needs to be recorded in Xero in such a way that it gets picked up on the VAT return. One way to do that is to use a manual journal entry.
Let’s say that the fuel scale charge has been calculated as gross £508 which is £423.33 net plus VAT of £84.67, it needs to be included in Box 1 of £84.67 and in Box 6 of £423.33 of the VAT return.
Xero does not allow you to post to an expense code in P&L using 20% VAT on Income. So a journal can be made firstly to record the fuel scale charge for VAT purposes using suspense with a corresponding entry to clear suspense and leave the fuel scale charge correctly in motor expenses (or whatever nominal code suits your business). Here is the journal entry to record the Fuel Scale Charge on Xero: